Would The Collapse Of Fiat Help Crypto?

in #steem10 months ago

I've seen many people in the space argue that once fiat collapses, that will be a boon to the crypto space as a whole including Steem.

What keeps the price of STEEM above zero right now is that there is a dedicated community that really wants to see the promise of decentralized social media/content delivery fulfilled. Many, if not most, are hoping for the inherent problems of centralized social media and content delivery to finally dawn upon the public, which would hopefully lead them to search for better options and to discover the freedom and ownership that comes with having your content and relationships securely stored on a public blockchain.

But would the collapse of fiat be a boon to Steem?

Absolutely not!

Just think about it for a minute. Cryptocurrencies lack the adoption and infrastructure necessary to become useful payment systems should fiat currencies collapse. Crypto adoption is not very advanced even in Venezuela where the entire financial and banking system is in shambles. More importantly, the valuations of all cryptocurrencies, including STEEM, are speculative at the moment. They are non-zero because a sufficient number of people around the world have sufficient loose change to keep investing in them. Fiat circulates in and out of Steem by Steemit, Inc and some early miners selling it in bulk with Steemit, Inc doing so to fund development and infrastructure for which it has to pay in fiat. The buyers of the token are mostly users of Steem who wish to increase their influence on the network and the value of their investment in case the network succeeds in growing.

What do you think would happen if hyperinflation wrecked the major economies of the world? You think most people could still afford investing in non-necessities like cryptocurrencies? Your salary, if you still had one, would be spent on buying necessities. And if you were among the many who lost their job, you'd be selling your cryptos to buy food and keep a roof over your head. Don't kid yourselves, if the economy collapsed, there'd be tremendous selling pressure on cryptocurrencies just like on any speculative financial instruments.

If fiat collapsed in the near future, that would most likely be the death of Steem. At its current level of development, it would have a snowball's chance in hell becoming the basis of an alternative economic system.

Just keep building. I will be happy if Steem manages to attract 5-10 million monthly active users. That would still be niche but hundreds of times more than we have now.


Thought provoking post.
Nice engagement here as the comments are also well thought out replies. I agree that a fiat collapse would have a high probability of being bad for most crypto’s and the existing infrastructure may be to undeveloped for crypto to replace fiat, but necessity is the mother of invention, and slow collapse through hyperinflation May allow crypto’s to become stores of value if cheap infrastructure develops as demand builds for common people to flee fiat at the point of paycheck payment...time will tell.
Thank you.

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I think the most likely mainstream crypto adoption scenario is one where Bitcoin is adopted as a monetary standard and a number of centralized or decentralized payment methods are used to move BTC around to be settled in bulk on chain. That's because stability is key in international trade. Cryptocurrencies are borderless, which means that what keeps national currencies going, which is that they are legal tender by government fiat in one country, won't be a limiting factor in crypto adoption. The lightning network might eventually be one of the few decentralized payment networks able to scale sufficiently on a global scale. Many centralized networks already exist that could be used to transmit BTC off-chain at a sufficient scale.

STEEM is a utility coin whose value is entirely tied to the value of the Steem network. I don't think it will ever be adopted as a universal payment system. Despite its high maximum throughput, I would still struggle to scale, and most importantly, STEEM's monetary policy is unstable and has a history of being changed too easily for it to serve as the basis of a monetary policy superior to that of fiat.

Oh, this world and all its different kind of economies are bubbling... It gives me a high blood pressure XD

Central banks continue to keep interests low and they're also going to have to keep up with or even ramp up their open market operations where they purchase financial assets to keep stock markets from collapsing and sovereign debt to keep national governments afloat.

Totally agree. Crypto is alive because fiat is alive and by now crypto is not an alternative to fiat. All of the exchange listed cryptos are simply assets in my opinion. Very few have the ability of replacing fiat, and to a small extent. For example you can buy coffee or redbull with BTC in some places, but they're too few. 99.9% of the people that bought crypto did that to earn more money by selling higher than they bought in, not to buy groceries with them. Some sort of cryptocurrencies will probably replace fiat, but not bitcoin or any other. I believe governments will develop their own cryptos to be used on a large scale, but the cryptos that we have now, and especially the ones that will survive for that era, will be simple assets, or collectibles of the new internet. That's how I see it. Great post!

Bitcoin's use case is not digital cash although Satoshi may have envisioned it to become a form of cash. Bitcoin's greatest value right now is in its being a non-correlated financial asset. That type of assets are useful in the diversification of a portfolio to gain better yields under bearish market conditions. The other major value proposition of Bitcoin is its hardness as money thanks to the fact that its inflation rate is programmed to halve at four-year intervals and that its monetary policy is extremely difficult to change. Bitcoin could replace corruptible central banks and become the new monetary standard as digital gold particularly if boosted by decentralized or centralized second layer solutions that allow the grouping of payments only to be settled at the blockchain level very sparsely. But that is currently theoretical. Bitcoin's adoption is far from that, yet.

Many people fail to appreciate the fact that blockchains are useful for building trustless distributed ledgers that do not rely on trusting any single third party. The distribution, particularly if the consensus mechanism is Proof-of-Work will always come with a high cost in terms of scalability.

In blockchain, the following is true: scalability, security, decentralization, pick two. You can't have all three at the same time. Centralized payment channels work perfectly fine for most applications.

I would like to see a small pullback in the economy. I think it would be the final straw that causes these scam and non-developing projects to finally collapse and leave the space.

It would be nice to look out at the landscape, even for just a little bit, to see actual projects with actual value in the top 50 on coinmarketcap.

You have a point there. Separating the wheat from the chaff yourself is too much work now. It would come in handy if the market did it.

"The Collapse of Fiat Currency," is in itself a huge topic. I think the predictions in this post would come true if all fiat currencies collapsed in a matter of months.

This isn't quite how currency collapse works though. There is a contagion factor when currencies are pegged to others but that peg isn't permanent.

The sudden collapse of fiat currencies around the world would most likely kill every kind of crypto. But that would also kill so much else that worries about the value of crypto currency would be very far from our minds.

A slow collapse of fiat around the world though is the very thing crypto needs and from what I'm seeing, the slow collapse of fiat is well underway.

Negative interest rates are a boon to all crypto.

Negative interest rates are definitely a boon to crypto. I fully agree on that. And a slow collapse would be idea, a very slow collapse at that, because it would have to be one that didn't wreck the economy.